Research Report on Impact of the Hotel Sector Expenditure on the Economy in Kenya: An Analysis of Selected Hotels in 2019

Abstract

Hotels are an integral part of a tourism destination. Provision of food, drink and accommodation is the core business of hotel establishments. In this regard, hotels engage in commercial activities with suppliers, employees and guests. The hotel product includes intangible services and tangible goods thereby having a wide economic activity spectrum. Economic impact studies are necessary as a prerequisite to policy decisions and structural changes in the tourism industry. This study researched on the economic impact of selected hotels to the national economy of Kenya. The theoretical model that guided the study was the Input-Output Model of measuring economic impact. The study was guided by the following objectives: To establish the direct economic impact of hotels to the national economy of Kenya, to assess the indirect economic impact of hotels to the national economy of Kenya and to assess the induced economic impact of hotels to the national economy of Kenya. The study also aimed to establish hotel spending on specific products as a prelude to the macro-economic impact. The targeted population for the study was all the Kenya Association of Hotel Keepers and Caterers (KAHC) member hotels in Kenya. The study undertook a census of the population by systematically acquiring and recording information from the association members of the KAHC. A total of 53 questionnaires were issued to all the members of the KAHC. The number of questionnaires collected after fieldwork was 29, representing a response rate of 54.7%. Economic inputs for this study were obtained from the following data sources: Kenya’s Input-Output that contains multi-regional Input-Output tables for 190 countries including Kenya and Kenya’s Social Accounting Matrix (SAM) which captures an economy’s expenditure and income linkages. SAM is derived by modifying the appropriate I-O table. Analysis was conducted using the IMPLAN Software package (https://implan.com) frequently used for tourism impact studies. Secondary data from the Kenya National Bureau of Statistics (KNBS) showed that the hotel sector contributed over USD 700 to the GDP. Hotel expenditure amounting to approximately USD 78 million was reported by 29 respondents. The expenditure was analyzed to establish employment labor income, total value-added and output of goods and services to the economy. The direct, indirect and induced effects of the hotel expenditure in these three areas, formed the total economic impact of sampled hotels to the economy. Hotel revenue for 20 hotels was reported as USD 121 million. The total impact was estimated to be: USD 157million as output, USD 35million as income and USD 95million as value-added. Many sectors of the economy are impacted by spending from hotels key amongst them being trade, taxes, financial services, transportation, electricity and health.